Featured Product

    IMF Publishes Reports on 2018 Article IV Consultation with Croatia

    February 13, 2019

    IMF published its staff report and selected issues report under the 2018 Article IV consultation with the Republic of Croatia. Directors commended the Croatian National Bank (CNB) for its conservative prudential policies and encouraged the authorities to consider additional measures to prevent excessive household borrowing, if needed. They welcomed continued efforts toward reducing the stock of non-performing loans (NPLs), encouraged continued improvements in bankruptcy legislation, and advised a comprehensive review to ensure that the insolvency framework aligns fully with the international best practices.

    The staff report highlighted that, overall, the banking system is very liquid, is well-capitalized, and has continued to gradually consolidate. The comfortable average capital adequacy ratio has eased the introduction of IFRS 9 and the gradual increase of risk-weights on foreign-exchange sovereign debt, beginning in 2018. The NPL ratio (90 days overdue) has continued to decline to 10.3% in September 2018, largely due to the NPL sales. Given the still high corporate indebtedness and the level of NPLs, provisioning remains high, although the coverage ratio declined somewhat to 59% due to the NPL sales. Beginning in 2018, the monitoring of loans overdue between 30 and 90 days has intensified and banks are required to develop strategies to lower their NPL ratio. Bank lending to households has been growing, although credit to the non-financial corporate sector has remained subdued. 

    The report further notes that financial intermediation costs of Croatian banks are still relatively high, possibly due to the relatively low level of digitalization, retroactive contract enforcement, or regulatory cushions. Recent research shows that better governance practices are conducive to more predictable contract enforcement and would help reduce costs, risks, and uncertainty of doing business, thus ultimately lowering the financial intermediation costs. The also report highlights that strong supervisory and macro-prudential policies of CNB have contained the potential pressure points. Effective from 2018, the appraisals of household housing loans were tightened, giving more emphasis to income indicators. The real estate market is also picking up, albeit from a low base and the recovery is rather segmented. Should both household borrowings and real estate prices further accelerate, additional macro-prudential measures may need to be considered, including a comprehensive debt-service-to-income ratio capturing all debts, not just debts related to housing loans. 

    The selected issues report explores how inter-sectoral vulnerabilities and risks have shifted over 2001–17 and especially after the global financial crisis. The report analyzes financial positions at the sectoral-level deposit-taking institutions and non-financial corporations, households, the public sector, and CNB by disaggregating them into instruments, currencies, and maturities. A section of the report employs balance-sheet analysis to gauge cross-sectional exposures and risks. Finally, the report discusses policies to reduce the remaining inter-sectoral vulnerabilities.

     

    Related Links

    Keywords: Europe, Croatia, Banking, Article IV, NPLs, Macro-Prudential Policy, CNB, IMF

    Related Articles
    News

    HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol

    HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.

    October 16, 2020 WebPage Regulatory News
    News

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).

    October 16, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on BRRD2 Transposition

    HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).

    October 15, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on CRD5 Transposition

    HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.

    October 15, 2020 WebPage Regulatory News
    News

    PRA Updates Supervisory Statement on Counterparty Credit Risk

    PRA published the final policy statement PS22/20, which contains the updated supervisory statement SS12/13 on counterparty credit risk.

    October 14, 2020 WebPage Regulatory News
    News

    FSB Publishes Update on Work to Address Market Fragmentation

    FSB published an update on its work to address market fragmentation. FSB is working in this area in collaboration with the other standard-setting bodies.

    October 14, 2020 WebPage Regulatory News
    News

    EBA Proposes to Revise Guidelines on Incident Reporting Under PSD2

    EBA proposed revisions to the guidelines on major incident reporting under the second Payment Service Directive (PSD2).

    October 14, 2020 WebPage Regulatory News
    News

    EBA Finalizes Standards for Prudential Treatment of Software Assets

    EBA published the final draft regulatory technical standards specifying the methodology for prudential treatment of software assets by banks.

    October 14, 2020 WebPage Regulatory News
    News

    FSB Publishes Roadmap on Cross-Border Payments, Report on Stablecoins

    FSB published a report presenting the roadmap to enhance cross-border payments by providing a high-level plan that sets ambitious but achievable goals and milestones in the five focus areas.

    October 13, 2020 WebPage Regulatory News
    News

    EIOPA Urges Insurers to Prepare for End of Brexit Transition

    In a recent communication, EIOPA urged the insurance sector to complete its preparations for the end of the Brexit transition period on December 31, 2020.

    October 13, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5959